Crossing the Chasm: Marketing and Selling High-Tech Products to Mainstream Customers

by Geoffrey A. Moore

Moreover, we are seeing a new effect which was just barely visible in the prior decade, the piggybacking of one company’s offer on another to skip the chasm entirely and jump straight into hypergrowth. In the 1980s Lotus piggybacked on VisiCalc to accomplish this feat in the spreadsheet category. In the 1990s Microsoft has done the same thing to Netscape in browsers. The key insight here is that we should always be tracking the evolution of a technology rather than a given company’s product line—it’s the Technology Adoption Life Cycle, after all. Thus it is spreadsheets, not VisiCalc, Lotus, or Excel, that is the adoption category, just as it is browsers, not Navigator or Explorer. In the early days products and categories were synonymous because technologies were on their first cycles. But today we have multiple decades of invention to build on, and a new offer is no longer quite as new or unprecedented as it used to be. The marketplace is therefore able to absorb this not-quite-so-new technology in gulps, for a while letting one company come to the fore, but substituting another should the first company stumble.

As uplifting as all of this sounds in theory, in practice it represents a great challenge not only to our economic institutions but to the human spirit itself. We may celebrate change and growth, but that does not make either one the less demanding or painful. Our emerging and evolving markets are demanding continual adaptation and renewal, not only in times of difficulty but on the heels of our greatest successes as well. Which of us would not prefer a little more time to savor that success, to reap a little longer what we cannot help but feel are our just rewards? It is only natural to cling to the past when the past represents so much of what we have strived to achieve.

The second problem with advertising is that it is a one-way mechanism of communication. As the emphasis shifts more and more from selling product to creating relationship, the demand for a two-way means of communication increases. Companies do not get it right the first time. To pick two current market-leading examples, the first Macintosh and the first release of Windows simply were not right—both needed major overhauls before they could become the runaway successes they represent today. This was only possible by Apple and Microsoft keeping in close touch with their customers and the other participants that make up the PC marketplace.

In particular, the relationship between an early market and a mainstream market is not unlike the relationship between a fad and a trend.

If in fact something does come out of it—if a value proposition is discovered that can predictably be delivered to a targetable set of customers at a reasonable price-then a new mainstream market forms, typically with a rapidity that allows its initial leaders to become very, very successful.

One of the most important lessons about crossing the chasm is that the task ultimately requires achieving an unusual degree of company unity during the crossing period. This is a time when one should forgo the quest for eccentric marketing genius, in favor of achieving an informed consensus among mere mortals. It is a time not for dashing and expensive gestures but rather for careful plans and cautiously rationed resources—a time not to gamble all on some brilliant coup but rather to focus everyone on making as few mistakes as possible.

In a moment we are going to take a look at these labels in greater detail, but first we need to understand their significance. It turns out our attitude toward technology adoption becomes significant—at least in a marketing sense—any time we are introduced to products that require us to change our current mode of behavior or to modify other products and services we rely on. In academic terms, such change-sensitive products are called discontinuous innovations. The contrasting term, continuous innovations, refers to the normal upgrading of products that does not require us to change behavior.

Between continuous and discontinuous lies a spectrum of demands for change. TV dinners, unlike microwave dinners, did not require the purchase of a new oven, but they did require the purchase of more freezer space. Color-TV programming did not, like VCRs, require investing in and mastering a new technology, but they did require buying a new TV and learning more about tuning and antennas than many of us wanted to learn. The special washing instructions for certain fabrics, the special street lanes reserved for bicycle riders, the special dialing instructions for calling overseas—all represent some new level of demand on the consumer to absorb a change in behavior. Sooner or later, all businesses must make these demands. And so it is that all businesses can profit by lessons from high-tech industries.

Because early adopters do not rely on well-established references in making these buying decisions, preferring instead to rely on their own intuition and vision, they are key to opening up any high-tech market segment.

The idea is to keep this process moving smoothly, proceeding something like passing the baton in a relay race or imitating Tarzan swinging from vine to well-placed vine. It is important to maintain momentum in order to create a bandwagon effect that makes it natural for the next group to want to buy in. Too much of a delay and the effect would be something like hanging from a motionless vine—nowhere to go but down. (Actually, going down is the graceful alternative. What happens more often is a desperate attempt to re-create momentum, typically through some highly visible form of promotion, which ends up making the company look like a Tarzan frantically jerking back and forth, trying to get a vine moving with no leverage. This typically leads the other animals in the jungle just to sit and wait for him to fall.)

The market-development problem in the case of both neural networking software and desktop video conferencing is this: With each of these exciting, functional technologies it has been possible to establish a working system and to get innovators to adopt it. But it has not as yet been possible to carry that success over to the early adopters. As we shall see in the next chapter, the key to winning over this segment is to show that the new technology enables some strategic leap forward, something never before possible, which has an intrinsic value and appeal to the nontechnologist. This benefit is typically symbolized by a single, compelling application, the one thing that best captures the power and value of the new product. If the marketing effort is unable to find that compelling application, then market development stalls with the innovators, and the future of the product falls through the crack.

What the early adopter is buying, as we shall see in greater detail in Chapter 2, is some kind of change agent. By being the first to implement this change in their industry, the early adopters expect to get a jump on the competition, whether from lower product costs, faster time to market, more complete customer service, or some other comparable business advantage. They expect a radical discontinuity between the old ways and the new, and they are prepared to champion this cause against entrenched resistance. Being the first, they also are prepared to bear with the inevitable bugs and glitches that accompany any innovation just coming to market. By contrast, the early majority want to buy a productivity improvement for existing operations. They are looking to minimize the discontinuity with the old ways. They want evolution, not revolution. They want technology to enhance, not overthrow, the established ways of doing business. And above all, they do not want to debug somebody else’s product. By the time they adopt it, they want it to work properly and to integrate appropriately with their existing technology base.

Because of these incompatibilities, early adopters do not make good references for the early majority. And because of the early majority’s concern not to disrupt their organizations, good references are critical to their buying decisions. So what we have here is a catch-22. The only suitable reference for an early majority customer, it turns out, is another member of the early majority, but no upstanding member of the early majority will buy without first having consulted with several suitable references.

Marketing professionals insist on market segmentation because they know no meaningful marketing program can be implemented across a set of customers who do not reference each other. The reason for this is simply leverage. No company can afford to pay for every marketing contact made. Every program must rely on some ongoing chain-reaction effects—what is usually called word of mouth. The more self-referencing the market and the more tightly bounded its communications channels, the greater the opportunity for such effects.

First, and most crucially, they want the truth, and without any tricks. Second, wherever possible, whenever they have a technical problem, they want access to the most technically knowledgeable person to answer it. Often this may not be sound from a management point of view, and you will have to deny or restrict such access, but you should never forget that it is wanted.

Pragmatists want to buy from proven market leaders because they know that third parties will design supporting products around a market-leading product. That is, market-leading products create an aftermarket that other vendors service. This radically reduces pragmatist customers’ burden of support. By contrast, if they mistakenly choose a product that does not become the market leader, but rather one of the also-rans, then this highly valued aftermarket support does not develop, and they will be stuck making all the enhancements by themselves. Market leadership is crucial, therefore, to winning pragmatist customers.

Overall, to market to pragmatists, you must be patient. You need to be conversant with the issues that dominate their particular business. You need to show up at the industry-specific conferences and trade shows they attend. You need to be mentioned in articles that run in the magazines they read. You need to be installed in other companies in their industry. You need to have developed applications for your product that are specific to the industry. You need to have partnerships and alliances with the other vendors who serve their industry. You need to have earned a reputation for quality and service. In short, you need to make yourself over into the obvious supplier of choice.

They want high-tech products to be like refrigerators—you open the door, the light comes on automatically, your food stays cold, and you don’t have to think about it. The products they understand best are those dedicated to a single function—word processors, calculators, copiers, and fax machines. The notion that a single computer could do all four of these functions does not excite them—instead, it is something they find vaguely nauseating.

There are two keys to success here. The first is to have thoroughly thought through the “whole solution” to a particular target end user market’s needs, and to have provided for every element of that solution within the package. This is critical because there is no profit margin to support an afterpurchase support system. The other key is to have lined up a low-overhead distribution channel that can get this package to the target market effectively.

The key to making a smooth transition from the pragmatist to the conservative market segments is to maintain a strong relationship with the former, always giving them an open door to go to the new paradigm, while still keeping the latter happy by adding value to the old infrastructure. It is a balancing act to say the least, but properly managed the earnings potential in loyal mature market segments is very high indeed.

The key lesson is that the longer your product is in the market, the more mature it becomes, and the more important the service element is to the customer. Conservatives, in particular, are extremely service oriented.

Now, it would be a much simpler world if conservatives were willing to pay for all this service they require. But they are not. So the corollary lesson is, we must use our experience with the pragmatist customer segment to identify all the issues that require service and then design solutions to these problems directly into the product. This must be the focus of mature market R&D—not the extension of functionality, not the massive rewrite from the ground up, but the gradual incorporation into the product of all the little aids that people develop, often on their own, to help them cope with its limitations. This is service indeed, for the best service, both from the point of view of convenience to the customer and low cost to the vendor, is no service at all.

In a comparable way, conservatives look to pragmatists to help lead them in their technology purchases. Both groups like to see themselves as members of a particular industry first, businesspeople second, and purchasers of technology third.

Lack of respect for the value of colleagues’ experiences. Visionaries are the first people in their industry segment to see the potential of the new technology. Fundamentally, they see themselves as smarter than their opposite numbers in competitive companies—and, quite often, they are.

Cross the chasm by targeting a very specific niche market where you can dominate from the outset, force your competitors out of that market niche, and then use it as a base for broader operations. Concentrate an overwhelmingly superior force on a highly focused target.

By simplifying the initial challenge, the enterprise can efficiently develop a solid base of references, collateral, and internal procedures and documentation by virtue of a restricted set of market variables.

The efficiency of the marketing process, at this point, is a function of the “boundedness” of the market segment being addressed. The more tightly bound it is, the easier it is to create and introduce messages into it, and the faster these messages travel by word of mouth.

Otherwise their “hot” marketing messages get diffused too early, the chain reaction of word-of-mouth communication dies out, and the sales force is back to selling “cold.” This is a classic chasm symptom, as the enterprise leaves behind the niche represented by the early market. It is usually interpreted as a letdown in the sales force or a cooling off in demand when, in fact, it is simply the consequence of trying to expand into too loosely bounded a market.

We do not have, nor are we willing to adopt, any discipline that would ever require us to stop pursuing any sale at any time for any reason. We are, in other words, not a market-driven company; we are a sales-driven company.

The consequences of being sales-driven during the chasm period are, to put it simply, fatal. Here’s why: The sole goal of the company during this stage of market development must be to secure a beachhead in a mainstream market—that is, to create a pragmatist customer base that is referenceable, people who can, in turn, provide us access to other mainstream prospects.

To do that, we must ensure that the customer gets not just the product but what we will describe in a later chapter as the whole product—the complete set of products and services needed to achieve the desired result.

Whole product commitments, however, are expensive. Even when we recruit partners and allies to help fulfill them, they require resource-intensive management. And when the support role falls back on us, it often requires the attention of our most key people, the same people who are critical to every other project we have going.

Now, for word of mouth to develop in any particular marketplace, there must be a critical mass of informed individuals who meet from time to time and, in exchanging views, reinforce the product’s or the company’s positioning. That’s how word of mouth spreads. Seeding this communications process is expensive, particularly once you leave the early market, which in general can be reached through the technical press and related media, and make the transition into the mainstream market. Pragmatist buyers, as we have already noted, communicate along industry lines or through professional associations.

This lack of word of mouth, in turn, makes selling the product that much harder, thereby adding to the cost and the unpredictability of sales.

Finally, there is a third compelling reason to be niche focused when crossing the chasm, which has to do with the need to achieve market leadership. Pragmatist customers want to buy from market leaders. Their motive is simple: whole products grow up around the market-leading products and not around the others.

But, in truth, mainstream customers like to be “owned”—it simplifies their buying decisions, improves the quality and lowers the cost of whole product ownership, and provides security that the vendor is here to stay.

The answer is that when you are picking a chasm-crossing target it is not about the number of people involved, it is about the amount of pain they are causing.

It is normally the departmental function who leads (they have the problem), the executive function who prioritizes (the problem is causing enterprise-wide grief), and the technical function that follows (they have to make the new stuff work while still maintaining all the old stuff).

The first is knocking over the head pin, taking the beachhead, crossing the chasm. The size of the first pin is not the issue, but the economic value of the problem it fixes is. The more serious the problem, the faster the target niche will pull you out of the chasm.

The PalmPilot team, headed by Jeff Hawkins on the technical side and Donna Dublinsky on the business side, had the advantage of seeing a lot of things not work. But to their credit they had the gumption to pick a focus and stick to it. The result was a truly compelling consumer product. The form factor fit in a breast pocket (obsoleting the pocket protector whose space and role it preempted). The application interface was intuitive to anyone who had ever used a Mac or Windows PC (the entirety of the target market), it had a hugely convenient docking station that facilitated upload/download to manage phone numbers and held out the promise of coordinating calendars (the world needed first to decide what calendaring system it would standardize on and then develop the behaviors and processes to support the effort—a work that is still in progress). It used a pen in a way that was restricted enough to actually work. And it met the consumer pricepoint of being under $400. And that was it. People loved this thing. The technology industry management teams took the lead on it, but pretty quickly it was getting passed around to “the rest of us,” and the passion did not abate. It is one of the few products after the Mac that has been able to create passion among a broad class of users. Why? Because it just nailed the problem these folks have. Success through subtraction is the key lesson here. And that subtraction was made possible by a vote of confidence in design esthetics and in ta...

So the investors are rarely enthusiastic about any niche strategy. Moreover, the R&D folks, looking ahead to the full charter, start to build in placeholders for the full array of supported features. And the sales folks, surveying the early opportunities, and liking to have their own turf, each march off in separate directions. It’s a huge challenge to manage.

To accelerate the adoption of platforms, then, vendors must clothe them in applications clothing. That is, they must tie them directly to an application in order to gain the end-user sponsorship necessary to secure a beachhead.

Applications normally lend themselves nicely to this kind of niche by niche market extension. Moreover, in any niche that you have saturated, you are likely to remain the market leader for a long time to come. Pragmatists do not like to switch. But this archipelago progression has a downside. It is much slower than mass market adoption, and so if a mass market does emerge, while you are working your handful of niches, some other player is gaining the rest of the world. This is what happened to Wang with its word processor application once PC-based word processors emerged. It is what happened to Lotus Notes when the Internet emerged. It was what happened to the Macintosh when Windows emerged. It was what happened to Silicon Graphics in the face of Sun and Intel.

Rather, they suffer from a built-in hesitancy and lack of confidence related to the paralyzing effects of having to make a high-risk, low data decision.

When segments are too large or diffuse, early leaders can be displaced by fast-following competitors who have greater resources to apply to the opportunity.

These are the two “natural” marketing rhythms in high tech— developing the early market and developing the mainstream market. You develop an early market by demonstrating a strong technology advantage and converting it to product credibility, and you develop a mainstream market by demonstrating a market leadership advantage and converting it to company credibility.

In other words, we must shift our marketing focus from celebrating product-centric value attributes to market-centric ones. Here is a representative list of each: Product-Centric Market-Centric Fastest product Largest installed base Easiest to use Most third party supporters Elegant architecture De facto standard Product price Cost of ownership Unique functionality Quality of support

Creating the competition involves using two competitors as beacons so that the market can locate your company’s unique value proposition. The first of these two competitors we will call the market alternative. This is a company that the target customer has been buying from for years. The problem they address is the one we will address, and the budget that is allocated to them represents the money we as a the new entrant are going to preempt. To earn the right to this budget, we are going to use a discontinuous product innovation to address a problematic limitation in the traditional offer. The second reference competitor we will call the product alternative. This is a company that has also harnessed a discontinuous innovation—perhaps, but not necessarily, the same one we have—and is positioning itself like us as a technology leader. Their very existence gives credibility to the notion that now is the time to embrace a discontinuity. Our intent here is to acknowledge their technology but to differentiate from them by virtue of our own niche market focus.

Think about it, Most people resist selling but enjoy buying. By focusing on making a product easy to buy, you are focusing on what the customers really want.

So how can we guarantee passing the elevator test? The key is to define your position based on the target segment you intend to dominate and the value proposition you intend to dominate it with. Within this context, you then set forth your competition and the unique differentiation that belongs to you and that you expect to drive the buying decision your way. Here is a proven formula for getting all this down into two short sentences. Try it out on your own company and one of its key products. Just fill in the blanks: • For (target customers—beachhead segment only) • Who are dissatisfied with (the current market alternative) • Our product is a (new product category) • That provides (key problem-solving capability). • Unlike (the product alternative), • We have assembled (key whole product features for your specific application).